ISLAMABAD: Standard & Poor’s (S&P Global Ratings) has maintained Pakistan’s long-term credit rating at “CCC+” and short-term rating at “C”. The long-term outlook remains stable.
S&P stated that Pakistan’s ability to manage its finances and external position over the next year will depend on continued support from international partners. They could lower the rating if Pakistan’s economic situation worsens or if fiscal deficits grow beyond what domestic banks can handle.
If the government’s cost of borrowing increases significantly, it could also lead to a rating downgrade. However, if Pakistan improves its financial situation, such as increasing foreign reserves or reducing debt costs, the rating might be upgraded.
Reuters adds: On Tuesday, S&P Global confirmed Pakistan’s “CCC+” rating, highlighting the country’s reliance on external aid due to its ongoing economic crisis. Pakistan recently secured a $7 billion bailout from the International Monetary Fund (IMF) to avoid default.
The IMF deal includes measures like higher taxes on farm income to boost revenue and reduce the fiscal deficit. Pakistan is also negotiating with Saudi Arabia, the UAE, and China to secure additional funding under the IMF program.
Although the risk of immediate default has decreased, S&P mentioned that strong foreign aid and managing current account deficits are crucial for restoring economic stability. Persistent inflation and modest economic growth could make it challenging to address the fiscal deficit. Additionally, a stable political environment is necessary to improve Pakistan’s credit rating.
